Starting a Business

Penn State Extension has a vast range of resources for anyone who wants to start a business in agriculture. In this section, you’ll find information relating to the legalities of running such a business, and advice on business plans, financing, pricing, marketing, and budgeting. Find ideas and opportunities including cooperatives, agritourism, and e-commerce farm businesses.

How to Start an Agriculture Business

There’s a lot of research to be done before you can start your new agricultural business. As in any other industry, the first step is to define your goals and objectives. This information is essential when you need to communicate with service providers such as the bank. A useful tool for getting an insight into your business is SWOT analysis. SWOT stands for Strengths, Weaknesses, Opportunities, and Threats).

Goals and objectives also have a key role in the development of a business plan. As a guide to the future of your business or venture, your business plan will also include the legal and business structure of your enterprise, management strategies, marketing, and financial plans.

Product pricing is also critical and is a determining factor for whether or not consumers purchase your product.

There are lots of resources to help with the first steps in starting a business. A Food for Profit workshop takes you step by step through the information necessary to start and run a small food product business. The Penn State Farm Management Handbook covers all you need to know for the successful management of your farm. For the legal side of your business, free legal services are available through Penn State Law.

Farm Planning

To manage a farm well requires careful planning. In most cases, you should plan for years, if not decades in advance. Your plans should cover the land, equipment, and resources you need, and the development of the farm business – from marketing to cashflow.

It means you need to understand the basics of budgeting. Budgets are an excellent planning tool for the upcoming season. Record keeping is critical for all farms.

If you want your business to thrive and be sustainable, you should look for ways to diversify your income. Another option is to extend your farming season. Knowing what prices to charge for your products and how to market them are also key to business growth. Strategies for successful selling should be applied throughout the year.

There are always risks involved in running a farm; for example, pests and diseases. Risk management tools can be used by new and beginning farmers. Risk management strategies include diversification, crop rotation, and the use of a variety of insurance products.

Agriculture Business Ideas and Opportunities

The opportunities for anyone wanting to start an agriculture business are wide-ranging. The important thing is to find a niche you’re passionate about that is also profitable.

Value-added ventures can be applied across most stages to further increase profits. Growth can also be increased by marketing value-added products.

Silvopasture is a farming system that integrates trees, livestock, and forage crops together to create dual income from timber and livestock. Cooperatives are a business type that is voluntarily owned and controlled by its member-patrons. Organic production is becoming more popular, but it requires lots of planning and research. Agritourism is another opportunity for would-be farmers.

Marketing your production is a key element of any farm’s success. It encompasses everything you do to promote your business and food products. How you market your crops impacts your profitability and your success when seeking outside funding.

Implementing e-commerce is a very attractive option for people interested in growing food for profit. More and more consumers are choosing to shop online, which makes e-commerce in a food or farm business very viable. A successful e-commerce business requires knowledge of payment methods and online ordering systems. You can measure your storefront’s success using a Secret Shopper Service and Network such as Under the Ground.

Farm Budgeting and Finances

For new farmers, one of the biggest hurdles is financing their business. Many businesses choose to start using personal savings, funds from family, or credit cards, but there are other options, such as a loan from a lending institution. There are lots of grant and loan opportunities if you want to start a farm. The Federal CARES Act Paycheck Protection Program is one example of a loan for forgiveness.

You can increase your chance of success when applying for a farm loan by knowing your farm enterprise and budgeting effectively.

A variety of budgeting methods can be used. Partial budgeting is a planning and decision-making framework you can use to compare costs and benefits. It helps farm managers assess the financial impact of changes such as the purchase of new equipment. Understanding the difference between markup and profit, and keeping a permanent record of receipts and expenses are also important.

Several different programs can provide small and beginning farmers with an all-important safety net. Programs include many types of business insurance, such as farm owner's insurance and crop insurance.